DeFi DIY: How to stake Ethereum on Lido Finance

Welcome to DeFi DIY, a recurring new feature where the DeFi genius at Decrypt walks you through how to use a specific DeFi tool or platform. Today: Staking Ethereum on Lido.

Not everyone has the 32 ETH needed to stake directly on the Beacon Chain, or phase 0 of the network’s transition to Ethereum 2.0 and proof of stake (point of sale) consensus mechanism.

To serve this community of small token holders, several projects have sprung up that allow users to wager any amount they want. Plus, you can still earn a bit of a return on these holdings.

(Also, for the full spiel on Ethereum 2.0, check out our Learn article here.)

Major services that offer low volume staking include RocketPool, Stafi, Lido, and several crypto exchanges. The performance of each service differs, of course, but everything is relatively simple.

Let’s dive into Lido specifically because it has become the most popular staking service, hosting over 32% of the 12.7 million Ethereum staked on the Beacon chain, according to Dune analysis. In dollars, that means Lido currently hosts $24.3 billion at current prices.

The staking process on Lido is simple.

Click on the “Stake now” button and go to the staking dashboard. From here, you can choose between different proof-of-stake networks, including SolanaKusama, Polygonand Ethereum’s Beacon chain.

Once you have chosen Ethereum, you will then be prompted to connect a Web3 wallet like Coinbase Wallet, WalletConnect or Metamaskamong others.

A word of warning: if you played with Aribtrum, Fantom or Avalanche, remember to switch back to Ethereum Mainnet in your wallet! Lido does not currently support these networks, so deploying capital could result in permanent loss of funds.

This is what your screen should look like:

Ethereum participation on the Lido. (Source: Lido Finance)

There “STETH“The ticker you see here means ‘staked ETH’, and this is the token you will receive after depositing your Ethereum.

It’s kind of like a receipt that shows you have ETH tied to Lido, but it also means you can put that stETH to work elsewhere in crypto (like struck the stablecoin AID on Maker, for example).

This is because stETH has real monetary value as it attempts to follow the price of Ethereum. Currently, however, the staked version of Ethereum is trading at a slight discount to the original Ethereum, according to Curve Finance.

steth eth
stETH and ETH pool on Curve Finance. (Source: Curve Finance)

Once staked, you can stop there. Earning 4% is a pretty generous return for such a simple task. Additionally, this yield is expected to increase once Ethereum completes its upgrade scheduled for August.

“Through the merger with the proof-of-stake chain, fees previously earned by miners will be passed on to those who stake. This should result in staking rewards between 7% and 12%,” writes Lucas Outumuro of InTheBlock.

If you’re feeling particularly ambitious this holiday weekend in the United States, give it a try.

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